Introduction of Security analysis & portfolio management
- 1. SECURITY ANALYSIS & PORTFOLIO MANAGEMENT INTRODUCTION OF SECURITY
- 2. Content - • Meaning of Security • Types of Securities • Meaning of Security Market • Types of Security Market
- 3. Meaning of Security :- • In general term, security means safety against some risk. • In banking term, security means guarantee against loan. • It also termed as an asset. • It includes bonds, debentures, notes, share, warrants etc. • It not includes insurance policies. • Traded in secondary market. In financial term, security means a certificate or a financial instrument that has a monetary value & can be traded.
- 4. Types of Securities :- There are three types of securities given below:-
- 5. Continue…. a) Equity securities –here an individual get an ownership of a corporation by purchasing its equity shares. E.g. common stock or preferred stock. b) Debt securities – these are the securities which a company takes as a loan for some specific period. Here the company pays interest. E.g. banknotes, bonds, debenture c) Derivatives – it is the contract between two or more parties based upon assets. Its price determined by fluctuations in the underlying assets.
- 6. Continue…. E.g. commodities, precious metals, currency, bonds, stocks, stocks indices etc. Real life example – When a farmer agrees to sell his corn to a broker at a certain price in the future, he signs a derivative with broker. Here the contract price is ₹ 100. If the price goes up i.e. ₹ 120, then the farmer in the loss; but if the price goes down i.e. ₹ 80, then the farmer in profit due to derivatives. Derivatives are generally used to hedge risks.
- 7. Meaning of Security Market:- • Security market is a small part of financial market where the securities can be brought & sold on the basis of their demand & supply.
- 8. Types of Security Market:- • Security market is of two types: -
- 9. Continue…. I. Primary market: This is the market place, for any company who wishes to go public from private and issues IPO (initial public offering) To raise fund, To fund their new project To raise additional funds for any ongoing projects. Such issues come to the market, individual buy directly from the issuing company.
- 10. Continue…. II. Secondarymarket: This is the market where all the existing shares of different countries trade in the market. After passing through the primary market, shares come to the secondary market to trade. Here prices are determined on the basis of demand and supply and other factors like industry specific and economy specific factors also affect the market. Secondary market is transparent, as trade only gets executed when the price of buyer and sellers matches. Secondary market in India is regulated by SEBI (Securities board of India).